Audi Said to Double SUV Lineup to Narrow BMW’s Sale Lead

By Christoph Rauwald -
Feb 20, 2013

Audi plans to double its lineup of
sport-utility vehicles by 2020 to close the sales gap behind
Bayerische Motoren Werke AG as more customers seek high-riding
vehicles with the cachet of a luxury brand.

The Volkswagen AG unit is developing the Q2, Q4 and Q6 as a
sportier alternative to its current range of three SUVs,
according to a person familiar with the strategy, who asked not
to be identified because the plans aren’t public.

“Audi is really the first with a grand plan to mirror”
its car offerings with corresponding SUVs, said Christoph Stuermer, an analyst with researcher IHS Automotive in
Frankfurt. “The SUV package, with its high seating position, is
similar to those beautiful, upright cars from the 1920s. This
could become the normal car in the premium segment.”

The push into SUVs, once a quirky add-on for sedan-heavy
upscale brands, reflects the expanding definition of a luxury
car. Sales of high-end SUVs are forecast to advance 36 percent
by 2018, according to IHS Automotive. The acceptance of SUVs
among wealthy consumers has made it one of the fastest-growing
segments, fueling a wave of new models as Audi, BMW and Daimler
AG’s Mercedes-Benz vie for the sales lead.

Audi, the world’s second-largest luxury-car brand, and No.
3 Mercedes are both seeking to topple BMW as the market leader
by the end of the decade. For Volkswagen, the development of
Audi is critical as it aims to become the world’s biggest
carmaker by 2018. Audi accounted for 48 percent of VW’s
operating profit in the first nine months of 2012, even though
it sold just 14 percent of the group’s cars.

Decisive Brand

“Audi is decisive for VW,” said Juergen Pieper, an
analyst with Bankhaus Metzler in Frankfurt. “You could say that
Audi’s the most important part of VW in terms of profit,
technology and branding.”

After increasing sales 12 percent to 1.46 million cars last
year, Audi’s profit may have helped Volkswagen post record
profit in 2012. The automaker is expected to report 11.5 billion
euros in operating profit, beating the previous year’s 11.3
billion euros, according to the average of 14 analyst estimates
compiled by Bloomberg. VW, based in Wolfsburg, Germany, is
scheduled to release detailed results for 2012 on March 14.

The new offerings mean Audi, which only moved into SUVs in
2005 with the Q7, will have six such models, roughly matching up
with its sedan and coupe lineup in a bid to catch up with BMW
and keep Mercedes at bay.

Mexican Plant

The compact Q2 will be based on the Crosslane Coupe concept
car shown at the Paris auto show last year, the person said. The
larger Q6 could be built at a new plant in Mexico alongside the
mid-sized Q5.

Audi expects the new offerings, along with performance
versions of its existing models such as the SQ5, to boost SUVs
to about 40 percent of the brand’s sales from about 25 percent
in 2012, the person said. The automaker is presenting a sportier
S version of the Q3 next month in Geneva, it said today in a
statement.

“We see a lot of potential in the SUV segment,” said Audi
Sales and Marketing Chief Luca de Meo. “We’re right in the
middle of our development,” he said, declining to give details
of specific model plans.

To keep pace, BMW is developing the X4, which would be its
fifth SUV. Mercedes plans to introduce a compact model to add to
the GLK, M-Class, GL and G-Class off-roader. The upscale SUV
segment is expected to grow to 3 million vehicles in 2018 from
2.2 million last year, according to IHS.

“SUV growth will continue and the manufacturers are
reacting to that with new models,” said Uwe Lexa, managing
director of AVG Rosier GmbH, a dealer group that sells Audi,
Mercedes, and other brands at 16 locations in northern Germany.
SUV buyers “span horsepower fans to moms with small kids.”

23 MPG

Automakers have moved to dilute concerns about the gas-
guzzling image of SUVs by adding hybrid versions and cleaner
engines. The Audi Q5 gets about 23 miles per gallon, compared
with 24 miles per gallon for the similar-sized A4 sedan.

The VW unit will reduce the weight of the next generation
of the Q7 SUV by as much as 400 kilograms (882 pounds) -- or
about 15 percent -- next year to improve fuel efficiency from
the current 18 miles per gallon, the person said.

The brand kicked off 2013 by beating BMW in monthly sales,
propelled by a 39 percent jump in deliveries in China, where
Audi is the top-selling luxury marque. The VW unit sold 111,750
vehicles worldwide in January, a 16 percent increase from a year
earlier. Deliveries of the BMW brand rose 12 percent to 107,276
autos.

For the full year, BMW is expected to recover, thanks in
part to its lead in SUVs, with the Munich-based carmaker’s sales
rising to 1.58 million versus Audi’s 1.45 million, IHS
Automotive predicts. The researcher expects Audi to drop back to
third in 2014 as Mercedes expands with the new SUV, revamps the
S-Class luxury sedan, and adds the CLA four-door coupe.

“Product proliferation continues to grow for the premium
brands,” said Jonathon Poskitt, an analyst with LMC Automotive
in Oxford, England. “They’re all going after that incremental
market share.”